Who could win and lose on tighter Trump AI controls? UBS weighs in
'The Trump administration is preparing new restrictions on AI chip exports to Malaysia and Thailand,' UBS noted, citing Bloomberg, 'with the aim of preventing advanced processors from reaching China via third countries.'
Malaysia is said to now account for nearly 12% of NVIDIA's global sales, making it a key AI data center hub. The proposed Commerce Department rule would target chipmakers like NVIDIA (NASDAQ:NVDA).
UBS highlighted that 'new regulations, on the heels of the June rally, could trigger volatility,' especially as recent tech gains were driven more by 'price-to-earnings multiple expansion than by positive earnings revisions.'
With companies now in their earnings blackout period, UBS believes 'there is less room for any misses in second-quarter results.'
Despite the regulatory overhang, UBS sees some potential winners. 'American data center operators will still be allowed to import US AI chips,' meaning that U.S. hyperscalers like Google (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) can continue regional expansion.
UBS added that 'Malaysian companies primarily serving US-backed projects should remain relatively insulated.'
However, firms building data centers 'speculatively or targeting Chinese demand may be more exposed to order cancelations or project delays.' UBS also noted that 'data center stocks in Southeast Asia may be more sensitive in the near term to headline risk.'
Overall, UBS remains constructive on the long-term outlook. 'We believe the robust secular trends in AI will continue to drive long-term gains in the tech sector,' the analysts wrote, even as they advise a 'balanced portfolio stance within tech and the AI value chain.'
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